How to work life insurance into your budget
Life insurance provides an important financial safety net, but it can be tough to figure out how to squeeze in one more expense when finances are tight – especially now.
At the peak of COVID-19 in April, over 23 million (14.7%) of American adults were unemployed, according to the Bureau of Labor Statistics. As of September, 12.6 million, or 7.9% of the workforce are still looking for jobs.
The good news? People often overestimate the cost of life insurance, and there’s a plan out there for almost every budget. Here’s how you can fit it into yours to get the amount of life insurance you need.
Can you buy life insurance on a budget?
Life insurance policies are much more affordable than you might think. A 2020 LIMRA study found that 65% of people haven’t bought life insurance because they believe it’s too expensive. In fact, people generally overestimate the costs of insurance premiums by three to five times the actual amount.
For example, a $250,000 term life insurance policy for a 30-year-old man in good health can be as little as $160 a year. According to the study, 50% of Millennials, however, believe it costs $1,000 or more for life insurance coverage.
What’s more, life insurance coverage can help provide more protection that you could on your own. It can be hard to save enough to keep your family covered. With life insurance, you pay a little and get a lot if you need it down the road.
Tips for budgeting for life insurance
Track your spending. Pay attention to your spending habits. Your budget can usually be broken down into fixed expenses like rent and car insurance, variable living expenses such as groceries or utility bills, debt, and savings. Look for ways to cut out unnecessary spending on stuff like daily coffee runs, subscriptions you don’t use, or online shopping. If you take that $160 a year estimate, your monthly life insurance premium would cost the equivalent of 3 Starbucks iced coffees ($13 a month).
Consider a term policy. Term life covers you for a set length of time, usually 10 to 30 years. Its level coverage and lower, fixed premiums make it much more affordable than permanent plans. The most popular policy on the market, term life works well for most people’s needs.
Determine the right amount. Knowing your budget as well as your financial needs is important when shopping for coverage. You don’t want to overpay for more than you need, but you don’t want to leave your family unprotected, either. To help figure out exactly how much coverage is right for you and your family, check out our term life calculator.
Buy earlier than later. One way to save money on a policy is to apply as early as possible. Working to improve your health is great, but if you wait to apply, you’ll end up paying more because life insurance rates go up every year you get older.
Shop around for quotes. Different insurance companies price you differently based on certain factors, so never be afraid to get a second (or third) quote before you commit. eFinancial works with top-rated carriers to give you the best options for your budget.
Still have questions about affording life insurance?
That’s what we’re here for. eFinancial is committed to helping you find the best coverage for your needs. Give us a call or start your quote online today.
At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.